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Univ. of Toledo College of Law

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Wednesday, May 27, 2009

SEC Settles Accounting Charges Against Three Former Cardinal Health Officers

The SEC settled charges against three former finance executives of Cardinal Health, Inc. (Cardinal), a pharmaceutical distribution company based in Dublin, Ohio, that they engaged in a fraudulent revenue and earnings management scheme. Cardinal’s former chief financial officer, Richard J. Miller, former controller and principal accounting officer, Gary S. Jensen, and former senior vice president of finance, Michael E. Beaulieu, without admitting or denying the allegations, consented to the entry of an injunction and agreed to pay a total of $245,000 in civil penalties.

The Commission’s Complaint alleges that, at different times from September 2000 through March 2004, the former Cardinal executives engaged in the misconduct in order to present a false picture of Cardinal’s operational results to the financial community and the investing public – one that matched Cardinal’s publicly disseminated earnings guidance and analysts’ expectations, rather than its true economic performance. The Complaint alleges that as a result of these actions, Cardinal materially overstated its operating revenue, earnings, and growth trends in public earnings releases and filings with the Commission.

In addition, separately, without admitting or denying the Commission’s findings, Miller has consented to the institution of administrative proceedings pursuant to Rule 102(e)(3) of the Commission’s Rules of Practice, suspending him from appearing or practicing before the Commission as an accountant, with a right to re-apply after five years, based on the anticipated entry of the injunction. Without admitting or denying the Commission’s findings, Jensen and Beaulieu also have consented to the institution of administrative proceedings pursuant to Rule 102(e)(3), suspending them from appearing or practicing before the Commission as accountants, with a right to re-apply after three years, based on the anticipated entry of the injunctions.

On July 26, 2007, the Commission filed a related action against Cardinal, in which it consented to the entry of an order enjoining it from violating the antifraud, reporting, record-keeping, and internal controls provisions of the federal securities laws and agreed to pay a $35 million penalty.

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